The Ivory Coast international striker signs as a free agent after his contract at Galatasaray expired.
Rumors of a return to Stamford Bridge gathered pace this week when Chelsea manager Jose Mourinho confirmed he would be interested in a deal.
Chelsea has now confirmed Drogba's return and he will compete alongside the likes of new signing Diego Costa, Fernando Torres and Romelu Lukaku for a spot in Chelsea's first team.
The striker told Chelsea's official website: "It was an easy decision — I couldn't turn down the opportunity to work with Jose again. Everyone knows the special relationship I have with this club and it has always felt like home to me. My desire to win is still the same and I look forward to the opportunity to help this team. I am excited for this next chapter of my career."
Drogba became a club legend at Stamford Bridge during his original eight-year spell from 2004 to 2012.
He scored 157 goals in 341 appearances and collected three Premier League titles, four FA Cups and two League Cups during his time at the club.
But Drogba's finest moment in a Chelsea shirt came in the final match of his first stint. The Londoners defeated Bayern Munich in the 2012 UEFA Champions League final at the Allianz Arena, with Drogba stroking home the winning penalty in a fraught shootout.
And Mourinho is confident that the Ivorian, who represented his country at the World Cup in Brazil, will still be able to cut it at the highest level.
"He's coming because he's one of the best strikers in Europe," Mourinho said. "I know his personality very well and I know if he comes back he's not protected by history or what he's done for this club previously. He is coming with the mentality to make more history."